Wednesday Morning Cheat Sheet: 3 Stories Moving Markets
The markets were up in Asia overnight. The Nikkei soared 3.77 percent as the nation’s Liberal Democratic Party edges closer to open-ended asset purchases and a weaker yen, which was trading at 93.74 to the dollar on Wednesday morning. The Hang Seng edged up 0.47 percent in Hong Kong, while the S&P/ASX 200 index increased 0.78 percent in Australia.
The markets were mixed in Europe at mid day. London’s FTSE 100 was up 0.22 percent, while Germany’s DAX was off 0.60 percent, and the STOXX 50 was down 0.91 percent.
U.S. futures at 8:00 a.m.: DJIA: -0.13%, S&P 500: -0.21%, NASDAQ: -0.34%.
1) “If the current laws that govern federal taxes and spending do not change, the budget deficit will shrink this year to $845 billion, or 5.3 percent of gross domestic product, its smallest size since 2008,” reads a report from the Congressional Budget Office. Optimistic about the short-term future, the CBO projects that the deficit could drop as low as 2.4 percent of GDP by 2015.
However, anyone with a head on their shoulders knows that there are structural and demographic problems facing the United States in the long run. The CBO cites “the pressures of an aging population, rising health care costs, an expansion of federal subsidies for health insurance, and growing interest payments on federal debt” as the cause of a projected increase in the deficit and total debt held by the American public by 2023. “If current laws remain in place, debt will equal 77 percent of GDP and be on an upward path,” the CBO projects.
2) Republican leaders were quick to shoot down a small package of spending cuts and tax reforms proposed by President Barack Obama that was aimed at patching some of the issues associated with the sequester, which is due on March 1. As scheduled, the sequester would cut federal spending by about $85 billion the first year it is in effect, and cut spending by a total of $1.2 trillion through 2022.
The first signs of ideological trench warfare in Washington have appeared, but congressional leaders and market participants are hoping to avoid another fiscal cliff-style showdown. The analysis done by the CBO, which shows the deficit dropping to $845 billion currently assumes sequester-style spending cuts.
3) Due to low mortgage rates and inventory levels, the euphoria in the real estate market continues to build higher. In December, home prices increased on a year-over-year basis for the tenth consecutive month.
CoreLogic, a leading property information and analytics provider, reported its home price index gained 0.4 percent in December from the previous month. Compared to December 2011, home prices jumped 8.3 percent, the biggest increase in the index since May 2006. CoreLogic’s data also shows that all but four states logged year-over-year price increases… (Read more.)
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